Business | Aviation
Arab airlines, from bigger to better
Ask just about anyone in the commercial aircraft business what they think of the Middle East, and you'll receive pretty much the same response.
- Special to Gulf News
- Published: 23:39 June 8, 2008
Ask just about anyone in the commercial aircraft business what they think of the Middle East, and you'll receive pretty much the same response. Thank heavens for Arab airlines!
For global manufacturers like Airbus and Boeing, these are mostly extremely challenging times. In the United States and Europe, the world's two largest markets, new aircraft orders are down significantly. Soaring fuel prices and general recessionary pressure are hitting airlines where it hurts most: ticket sales are slumping, and profits are plunging. Not surprisingly, US and EU carriers aren't ordering many new aircraft.
In the Middle East, it's an altogether different story. Today, the region has the greatest number of aircraft on order anywhere on earth. The Middle East is also home to the world's youngest fleet - with a total of over 600 aircraft, and more on the way just about every day.
Here in the region, just like in the West, increasing fuel prices represent an ongoing challenge to the profitability of any airline. At the same time, of course, higher oil prices also mean increased revenues for oil-producing states. Between now and 2020, the Gulf states are forecast to earn a staggering $9 trillion in oil revenues. As a consequence, the Gulf states' nominal GDP is expected to expand by 14 per cent this year alone, up from 11 per cent in 2007.
Unlike during past oil booms, this time Arab states are reinvesting much of their surplus wealth right back into the region. Last year, the Gulf states announced projects worth in excess of $2 trillion, a 43 per cent increase over the previous year. Importantly, much of that investment is focused on infrastructure development, including airlines, airports and ancillary services. The private sector is also being actively encouraged to participate in such investments, including through public-private partnerships.
As a result of all this activity, Arab airlines are getting bigger. They are also getting better, with higher service levels and more competitive pricing. Yet considering the demographics of the wider region - with 100 million people under the age of 24 and a rapidly growing expatriate population - the supply of airline travel solutions is still just barely keeping up with demand.
Open-skies
In the longer term, growth in the industry will only be sustained if the region continues to focus on liberalisation, deregulation and the complete implementation of open-skies policies. Governments across the Middle East and North Africa must abandon historically protectionist policies, and embrace the promise of free trade. To avoid being marginalised as simply suppliers of crude and petrodollar investments, Arab states must become full participants in the global economy.
Considering the enormous growth potential of the regional aviation sector, which is already the world's fastest-growing market in terms of passenger demand, ensuring that open-skies policies are fully implemented simply makes good sense. As more aircraft are delivered, and further new airlines are launched, it's critical that all these planes are allowed to fly freely - ensuring that passengers have the freedom to choose where and when they want to travel, and with the carrier they prefer.
- The writer is board member and CEO, Air Arabia.
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